Overview of Background Factors

• What does ‘project finance’ mean?
• What key features do we see?
• Parties involved - interests and roles
• Documentation - what are the aims?
• Project development process

What is Project Finance?

• Importance of cash flow
• Who are the major players?
• What is covered by due diligence?
• Understanding the risk allocation
• Project economics and cash flow models

Why Use Project Finance Structures?

• Why is project finance used?
• Limited recourse structures
• Investors - gearing benefits
• Commercial lenders' requirements
• Public sector interest in project finance

Lending Principles

• How do lenders assess projects
• Assessing credit worthiness

Sources of Project Finance

• Investment funding
• Commercial debt facilities
• Credit enhanced bond issues
• Export credits
• MLA facilities and co-financings
• Leasing

What Can We Learn From Successful Projects?

Understanding Project Risks

• Common causes of project difficulties
• Practical risk analysis methodology

Key Areas of Project Risk

• Concession and implementation risk
• Construction risks
• Offtake and sales risks
• Foreign exchange and interest rate risks
• Covering country and political risks
• Project risks in particular sectors

Project Appraisals

• Developing a methodology

Cash Flow Analysis

• What do we want from a model?
• Repayment profiles and coverage ratios
• Key management concerns with models

Commercial Documentation

• Overview of the commercial matrix
• Concession documents
• Covenants, EODs and termination
• Shareholder agreements
• Sales and off-take contracts
• Supply contracts
• Construction arrangements
• O&M agreements
• Project insurances

Loan Documents

• Basic controls, disciplines and EODs
• Intercreditor issues and concerns
• Project forecasts and upside sharing
• Syndication and the deadwood clause

Security and Support Documentation

• Defensive aims of security